Loan Against Property
Can help fulfill your Business and Personal needs
What is Loan Against Property (LAP) ?
Loan against Property (LAP) can be availed against the mortgage of a self-owned property for any personal or business purposes. The property acts as a collateral to support the finance provided by the lender. The margin for Loan against Property usually ranges from 50-90% of the value of the property (also known as LTV or Loan-to-Value).
Different Types of Loan Against Property for Your Various Needs
Business Expansion Loans
Business entities can avail this facility for acquiring new machinery, purchase of plant, meeting working capital requirements, and invest in new technology or business. The lending banks require collateral in the form of property, residential, commercial, or industrial. Depending on the nature of the property available as collateral, the lending banks calculate the loan eligibility. For commercial properties, the LTV is around 55- 65%. In the case of industrial properties, the LTV reduces to 40-55% whereas the LTV in the case of residential property is in the range of 65-70%.
Personal Expenses
Individuals can also avail Loan against the Property for personal expenses such as medical expenses, educational expenses, marriages, travel, as well as for purchasing consumer durables.
Lease Rental Discounting
Some banks offer loans against the future rent receivables, especially in metropolitan and urban areas. One should note that the property that fetches the rent should also be mortgaged in favour of the bank. Banks usually finance in the range of 75% to 90% of the future lease/rent receivables. The tenure of such loans is shorter and should end before the expiry of the lease or the rental
Working Capital Overdraft Facility
Banks sanction overdraft facilities against the property for meeting the day-to-day working capital requirements. Under such circumstances, the property is accepted as collateral. Lending banks estimate the amount of finance required based on the following figures:
- Property value and nature of the property
- Actual working capital requirement calculated as per the internal policies of the bank, usually the Projected Annual Turnover method.
Home Renovation
Usually, people do not avail this loan for renovating homes as there are separate schemes available at comparatively lower LAP interest rates. However, there can be circumstances when the borrower might have to resort to avail a Loan against Property for home renovation.
Balance transfer
Transfer an existing Loan against Property (LAP) to another bank or NBFC that gives you better Loan against Property (LAP) eligibility criteria and interest rates.
How to Apply for a Loan Against Property (LAP)?
Fill Application Form
Enter your details in the Loan against Property (LAP) Application Form and furnish your essential documents as asked to further the process
Free Consultancy
You will receive call from Megamind loans Loan against Property (LAP) Specialist team, They will give full details and offers of different banks & NBFC.
Bank Process
as per your choice, your application get processed in desired bank for further verification and legal processing of documents.
Approval & Disbursal
After approval, your Loan against Property (LAP) Amount will be disbursed to your Bank Account
Features & Benefits of Loan Against Property (LAP)
Easy to get
LAP is a secured loan making it easier for lenders to offer money to the borrower as it is backed by collateral. Longer tenure: Usually banks sanction a LAP between Rs. 3 Lakhs to Rs. 100 Crores. It is the only loan facility other than the Housing Loan that allows banks to stipulate repayment period of up to 20 years.
Lower interest rate
In comparison to Personal Loans, a LAP loan has a lower rate of interest. The reason is the security offered to the banks.
Lower EMI
When you have longer tenure and a lower interest rate, the EMIs are bound to be lower
Flexibility
Various banks have flexible loan products in this category, including term loans, overdraft facilities, reverse mortgage, etc.
Types
LAP can have various types, such as loan against residential/commercial property, loan against rent receivables, reverse mortgage, and so on
Tax benefits
You get benefits tax benefits if you avail a loan against property for home renovation purposes. Usually, customers go for home renovation loans if they have to carry out repairs to the same property to be mortgaged to the bank. You might carry out repairs to your home but avail a mortgage loan by mortgaging another property. Under such circumstances, you have to prove that the end use of the loan is for carrying out renovations to the property you reside in.
Fees and Charges for Loan Against Property (LAP)
You should be ready to pay the processing fees for your housing loan. Some banks charge less processing fees, but may make up for that somewhere else. On the other hand, some banks and financial institutions consolidate their charges and include them in the processing fees. Let us look at some common charges you will most likely incur when you apply for home loan.
Upfront fee for processing
Many banks charge an upfront fee for processing your application. This is usually in the range of Rs. 3,000 to Rs. 5,000. This is a non-refundable fee, even in case the bank rejects your loan application. In case they sanction your loan, they adjust this fee in their regular processing fees.
Processing fee
This amount ranges from 0.20% to a maximum of 2% depending on your employment status. Salaried employees incur a smaller fee whereas self-employed professionals and business persons have to pay more. Some banks do have a uniform rate. Note that you have to pay GST @ 18% on this processing fee.
Valuation charges
Many banks charge for the valuation of the property. They have independent evaluators on their panel. These banks have a fixed structure of payment. Some banks insist that the customer pays to the bank whereas some of them include this amount in their processing fee structure.
Legal scrutiny charges
Legal scrutiny of the property is mandatory. The financing bank has to ensure that you get a clear title to the property so that the mortgage holds well in law. Therefore, they have a panel of legal experts who carry out the search for a period of 30 years. You need to supply the property documents to these advocates to allow them to do the needful. Some banks ask the customer to pay the advocates separately whereas many banks include these charges in their processing fees.
Mortgage registration charges
The prime security for the home loan is an equitable Most of the states in India require you to register the equitable mortgage in the bank's favour. Under such circumstances, you incur stamp duty and registration charges. The equitable mortgage does not attract stamp duty in some states like Rajasthan. However, in states like Tamil Nadu, there is a stamp duty of 1% of the loan amount subject to a maximum of 25,000. In addition, you have to pay 5,100 as registration charges. These charges changes state wise please consult with lawyer/Financial consultant for better under standing. Be aware of these additional expenses when you avail Loan against Property (LAP).
Pre-EMI charges
Some banks have the system of charging pre-EMI charges. Ascertain these charges beforehand.
Insurance
Taking out insurance for the property is mandatory. At the same time, many banks and financing companies bunch a lot of their products like loan insurance, Mediclaim family floater policies, accident insurance, and critical illness cover, etc along with the loan. They provide the financing for the premium as well. Of course, you have to repay the same in your EMI. In a way, it is good to have these insurance policies because life is uncertain. In case something happens to the breadwinner and the principal borrower, the insurance can take care of the liability. However, other than the property insurance, all the other policies are optional. You can refuse to take them.
Loan Against Property Eligibility
Various factors go into the determination of your Loan Against Property eligibility. The basic rules for salaried people and self-employed people are the same. Some banks stipulate a higher take-home pay percentage for self-employed persons.
Your current income
Salaried employees can submit salary slips for the last three months and furnish a bank statement for the past six months where their salary is credited. Self-employed professionals should submit the statement of accounts for one year where they receive the credits for the services rendered by them.
Continuity of employment/business
Salaried employees can rely on their income tax returns, Form 16, Form 26AS, etc to display their continuity of employment. They can also show a statement of the Provident Fund account to establish the links. Self-employed businessmen and professionals can furnish the income tax returns along with other financial statements like balance sheet and profit and loss statements. They can also furnish copies of invoices raised by their clients.
Current obligations
It is possible that an applicant might have pre-existing personal loans, vehicle loans, and other loans for which they might be paying instalments. You have to account for these instalments as well while calculating Loan Against Property eligibility.
Credit history
he repayment track record of the applicant is of utmost importance. Every bank or financial institution is a member of CIBIL or another credit bureau. These bureaus keep track of the loan activities of every borrower. Based on this information, they generate your credit history profile and quantify the same by generating your credit score. This is a number ranging between 300 and 900. The higher your score, the better are your chances of getting a loan. Naturally, it goes without saying that defaults, frequent requests for loans or missing payments can pull down your credit score. A score of 600 and above is considered fair for determining Loan Against Property eligibility.
Value of the property
The value of the property you purchase is important. The financing bank needs to determine the cost of the project it is going to finance. Banks usually finance up to 50% - 90% of the value of the property (also known as LTV or Loan to Value Ratio) with the balance being your contribution or margin as they call it.
Legal position
The prime security for any Loan Against Property is a mortgage of the land and building they have financed. You have to create the mortgage and register the same with the respective registering authorities. In order to do so, you must be legally empowered to create the mortgage. Hence, banks and financial institutions insist on a legal scrutiny report from their panel of advocates who carry out a search for the previous 30 years to establish the ownership chain.
Age of the borrower
The minimum age of the borrower at the time of home loan application should be 21. The age at the time of maturity should generally be 65 years. Some banks stretch this limit to 70 years.
Loan Against Property (LAP) Documents Required
Every customer has to satisfy the Know Your Customer (KYC) norms stipulated by RBI. You have to provide the documents relating to your KYC, employment, business, and income
Identity Proof
- PAN Card
- Aadhar Card
- Voter ID
- Driving Licence
- Passport
Address Proof
- Registered Rent agreement
- Aadhar Card
- Driving License
- Lease agreement
- Passport
- Latest Gas or electricity bill
Other documents:
- Loan application form duly filled in
- Photographs
- Signature Proof
Property documents:
- Copies of all property documents that can establish the chain of ownership for the past 30 years.
- Encumbrance certificate for 30 years
- Property tax paid receipt in case you reside in the property being mortgaged (usually when you apply for Home Loan Balance Transfer).
Income Proof Documents:
- Salary slips for the last 6 months in case you are a salaried employee (In addition, you can provide IT returns for the past 3 years along with Form 16).
- IT returns for the past 3 years in case you are self-employed (Some banks accept 2 years IT returns as well).
- Statement of A/c for the past 1 year where your salary is credited (in case of salaried people).
- Profit and Loss statement and Balance sheet for the last 2 years in case of self-employed persons.
- Sales tax, GST registration certificates, if applicable.
- Partnership deed in case of partnership firms (if the applicant is one of the partners).
- Certificate of Incorporation in case of limited companies(if the applicant is one of the directors).
Loan Against Property EMI Calculator
When you decide to apply for a Loan Against Property, you need to assess your repayment capability so that you don’t end up in any financial problems and can find the cheapest Loan Against Property. Loan Against Property EMI Calculator is a useful tool in this regard for calculating the EMI (equated monthly instalment) of a Loan Against Property. It is a free of cost user-friendly tool that can be used anytime and from anywhere to calculate the monthly instalments you will have to pay. The Loan Against Property EMI Calculator requires you to enter a few Loan Against Property details to give you an accurate result, such as loan amount, interest rate, and repayment tenure.
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